As we head in to the final month of what has been a tremendous year for the stock market, the 24/7 staff is reviewing what the major Wall Street firms are recommending for the stretch run and in 2014. The third-quarter earnings season wrapped up in November with stocks on the UBS Equity Focus list averaging earnings per share gains of 5% better than Wall Street estimates.
We took a deep-dive into the stocks on the UBS list and screened for the names they feel will outperform in December and in 2014. With Black Friday’s results on the books and Monday’s Cyber Monday online sales expected to be better than last year, retail sales are still a wildcard for stocks and the economy. The UBS team has added three new names to the list. We highlight those, plus other top names the firms thinks are buys.
Covidien PLC (NYSE: COV) makes a debut on the UBS list for December. Covidien was spun-off from Tyco in mid-2007 and is one of the largest medical technology companies in the world, with leading market shares in general surgery products. Investors are paid a 1.9% dividend. The UBS price target for the stock is $74. The Thomson/First Call estimate $72. Covidien closed Friday at $68.26.
Macy’s Inc. (NYSE: M) is a top retail name added to the UBS list. The UBS analysts feel that the company will benefit from an improving economic environment. Plus, as the labor market gradually improves, the company should benefit from higher wages and job additions. Macy’s has also made great strides in improving its online sales ability. Investors are paid a 2% dividend. The UBS price target for the stock is posted at $58, and the consensus is at $54. Macy’s closed Friday at $53.26.
Microsoft Corp. (NASDAQ: MSFT) is the third stock added to the UBS list. The huge response to the Xbox One debut may have taken the company by surprise. With more than one million units sold on the opening day, shoppers are finding it tough to find the in-demand gaming console. With Steve Ballmer leaving the company and a new chief executive coming in, 2014 stands to be a pivotal year for the software giant. Investors are paid a very solid 3% dividend. The UBS price target is $51, while the consensus stands at $36. Microsoft closed Friday at $38.13.
With UBS favoring techs, financials and industrials for 2014, we scanned its list for the top names to buy in those sectors.
American Express Co. (NYSE: AXP) is on the UBS list in the financial sector. The company is active in all aspects of the payments industry. It issues charge and credit cards, operates a payment network and acts as a merchant acquirer. A great holiday season may add extra revenue for the company. Investors are paid a 1.1% dividend. The UBS price target for the venerable credit card company is $96. The consensus target is $83, and the stock closed Friday at $85.80.
J.P. Morgan Chase & Co. (NYSE: JPM) is another top financial powerhouse on the UBS list. As 2014 comes to an end, the company also may be nearing the end of a bad year for losses and penalty payouts. The company is expected to benefit from commercial loan growth and an upturn in capital spending. Investors are paid a 2.7% dividend. The UBS price target is posted at $64, and the consensus is at $63. The stock closed Friday at $57.22
Apple Inc. (NASDAQ: AAPL) is a top technology stock to buy at UBS. The stock has rallied back into the black after a very difficult year. Mobile sales accounted for more than 21% of all online sales during Black Friday, a 9.8% increase over last year. Investors receive a 2.3% dividend from the tech Goliath. The UBS price target is $579, while the consensus is the same. Apple closed Friday at $556.07.
Qualcomm Inc. (NASDAQ: QCOM) is another blue chip technology stock to buy for 2014. The company makes a healthy operating profit from the sale of chips into more than half of the world’s smartphones and tablets. But a full two-thirds of its operating income comes from the licensing of its wireless technology and patents — it gets a cut from just about every cellular device sold. Investors are paid a 1.9% dividend. The UBS price target for the stock is $81, and the consensus price objective is $80. Qualcomm closed Friday at $73.58.
Boeing Co. (NYSE: BA) remains a top industrial name to buy for 2014. Despite ongoing issues with the Dreamliner, the company has had outstanding sales and orders for the 777 and 737 models. The stock is also another name expected to benefit from an increase in capital spending in 2014. Investors are paid a 1.4% dividend. The UBS price target is $145, and the consensus target is at $142. Boeing closed Friday at $134.25.
Tyco International Ltd. (NYSE: TYC) is another top industrial name to own for next year. Tyco reported strong fourth-quarter fiscal 2013 results as both revenues and earnings increased year over year. The rebound to earnings was driven by accelerated growth in service and products, along with increased benefits of productivity initiatives. Investors are paid a 1.7% dividend. The UBS price target is under review and was not available. The consensus target is $39.50. Tyco closed Friday at $38.14.
UBS has stressed to its customers that it favors large cap names over the small caps in 2014. The firm also favors cyclicals as they will benefit the most from economic growth and an increase in business and consumer spending. We have stressed to our readers to be cautious as we head in to the new year. Once again, the politicians in Washington will have to confront the budget and debt ceiling. This has proven to be a volatile issue in the past and should continue to be so in January.